The federal cabinet, led by Prime Minister Anwaarul Haq Kakar, approved a hike in gas prices on Monday to garner an additional Rs350 billion from consumers for the current fiscal year. However, there have been slight adjustments in the recommended rates, especially for industrial and CNG consumers.
On November 1, domestic consumers will see an increase of up to 172%, commercial consumers by 137%, and cement manufacturers by 193%. Interestingly, some proposed hikes, particularly for processing units across non-export and export industries, captive power plants, and CNG consumers, were redirected to the Economic Coordination Committee (ECC) for more extensive discussions.
Energy Federal Minister Mohammad Ali elucidated that should the ECC reach a consensus on the rates for these categories; the federal cabinet will automatically approve them. He further revealed that the ECC, after convening after the cabinet meeting, approved revised rates for specific segments, with Interim Finance Minister Dr. Shamshad Akhtar at the helm.
Impacts and Rationales of the New Rates
Effective November 1, the adjustments made will not negatively affect the revenue requisites. To bridge the discrepancy, rates for captive power plants and processing units for exporters have been hiked, while those for non-export categories have been lowered.
A statement from the Ministry of Energy indicated that 57% of domestic consumers wouldn’t experience an increase. Furthermore, the ministry unveiled a fixed bill of Rs400 per month, a minimal amount. The ministry strongly asserted the country’s inability to continue offering meagre prices for such a scarce resource, ensuring protection for lower consumption brackets.
Several modifications have been made to the consumption slabs, adjusting rates to reflect the current LPG costs. Some tiers, especially the upper echelons, exceed LPG and LNG prices.
The Ministry of Energy acknowledged the challenges during this decision-making process, stressing the tension between affordability and sustainability. With Pakistan under the IMF program, subsidies have been eradicated.
The revision is essential to avert bankruptcy for major gas distribution companies such as SNGPL and SSGCL. The ministry shed light on the complications caused by the rupee’s drastic devaluation against the dollar and general inflation, which has augmented the expenses associated with gas operations.
Past governance mishandled gas pricing, neglecting the financing for imported gas, resulting in a staggering Rs2.1 trillion debt in the gas sector.
